American Woodmark Corporation

Good day, everyone, and welcome to the American Woodmark Corporation's second fiscal quarter 2024 conference call. Today's call is being recorded November 30th, 2023. During this call, the company may discuss certain non-GAAP financial measures included in our earnings release, such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net leverage, and adjusted EPS per diluted share. The earnings release, which can be found on our website, AmericanWoodmark.com, includes definitions of each of these non-GAAP financial measures, the company's rationale for their usage, and the reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures. We also use our website to publish other information that may be important to investors, such as investor presentations. We'll begin the call by reading the company's safe harbor statement under the Private Securities Allegation Reform Act of 1995. All forward-looking statements made by the company involving material risks and uncertainties and are subject to change based on factors that may be beyond the company's control. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied under any such forward-looking statement. Such factors include but are not limited to those described in the company's filings with the Securities and Exchange Commission and the annual report to shareholders. The company does not undertake to publicly update or revise its forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. I'd now like to turn the floor over to Paul Jahinchek, Senior Vice President and CFO, please go ahead, sir.

Good afternoon and welcome to American Woodmark's second fiscal quarter conference call. Thank you all for taking the time today to participate. Joining me is Scott Culbreth, President and CEO. Scott will begin with a review of the quarter and I'll add additional details regarding our financial performance. After our comments, we'll be happy to answer questions.

Thank you, Paul, and thanks to everyone for joining us today for our second fiscal quarter earnings call. Our teams delivered net sales of $473.9 million, representing a decline of 15.6% versus the prior year. Within new construction, our business declined 11.1% versus prior year. Macroeconomic factors, including interest rates and housing affordability, continues to account for the slowdown in new construction. These short-term factors are being partially mitigated by builders, through rate buy-downs and shifts to ready-to-move-in homes and build-to-rent homes. We are strategically aligned with 19 of the top 20 national builders and key regional builders. With our best-in-class direct service model, we plan to continue to grow our share with new and existing customers and take advantage of the share gains our partners are realizing in the marketplace. Looking at remodel, which includes our home center and independent dealer distributor businesses, Revenue declined 18.8% versus the prior year. Within this, our home center business was down 18.3% versus the prior year. Demand trends declined due to lower in-store traffic rates and consumers choosing smaller size projects. With regards to our dealer distributor business, we were down 20% versus the prior year. Our adjusted EBITDA increased 7% to $72.3 million, or 15.3% for the quarter. The reported EPS was $1.85, and adjusted EPS was $2.36. The improvement in performance is due to product mix and improved efficiencies in the manufacturing platforms. Our team continues to drive operational excellence in our plans. Our cash balance was $96.4 million at the end of the second fiscal quarter, and the company has access to an additional $323.2 million under its revolving credit facility. Leverage was reduced to 1.05 times adjusted EBITDA, and the company repurchased 394,000 shares in the quarter. Our board has authorized a new $125 million share repurchase program that replaces our current authorization that only had $22.9 million remaining. Our outlook for fiscal year 24 remains unchanged, with our expectations for sales at a low double-digit decline. Due to the strong fiscal Second quarter performance, our adjusted EBITDA expectation is increasing to a range of $235 million to $250 million. Our team continues to execute against our strategy that has three main pillars, growth, digital transformation, and platform design. Growth will benefit from an upcoming launch of a low-skew, high-value offering in the home centers targeting pros and a new brand to serve our distribution customers. Digital transformation efforts over the last fiscal quarter include the final planning of ERP for Monterey Go Live next quarter and website enhancements for our home center business that will launch in February. In addition, we completed the implementation of our CRM sales solution across the new construction channels field sales organization, and we initiated the planning for the next phase of work, which includes the CRM service module supporting our customer care organization and new construction service center operations. Platform design work continues with occupancy in Monterey, Mexico in November and Hamlet, North Carolina in December. We will continue infrastructure and equipment installations in the coming months, as well as training and hiring new teammates to support the initial ramp plan. As a reminder, this expansion will deliver additional capacity in our stock kitchen and bath cabinetry product lines. In closing, I'm proud of what this team accomplished in the second fiscal quarter and look forward to their continuing contributions during fiscal year 24. I'll now turn the call back over to Paul for additional details on the financial results for the quarter. Thank you, Scott.